This is more than just an angry rant about the third world's huge debt burden - it suggests practical proposals to solving an intractable problem, says Francis Beckett.

This book should finally establish Noreena Hertz's position as Britain's Naomi Klein - but, as befits the British version, with a more radical edge than the author of No Logo. It allows us to dismiss the question marks raised by some commentators when, after perhaps too great a fanfare, she published The Silent Takeover in 2001.

That book was savagely attacked by New Labourite commentators. It was better than they allowed, but offered more questions than answers, more anger than analysis. It was also seriously undermined by its publisher, which printed a pin-up picture of the undoubtedly attractive young academic author on the inside front cover and in its publicity material. I recall meeting the editor of a trendy intellectual magazine at a reception. 'You only like her because she's pretty,' he said. I'd better not say who it was. Oh, all right then, it was David Goodhart, editor of Prospect.

Dr Hertz is an unlikely rebel. A business school academic at Cambridge's Judge Institute of Management Studies, a precocious MBA from Wharton, product of a splendid north London private school, she was sent to Russia, aged 23, just after the collapse of communism, as a consultant for the International Finance Corporation, the World Bank's sister organisation, to advise the Russian government on economic reforms. All that suggests another sharp-toothed young post-Thatcherite go-getter, pursuing the next buck with single-minded determination.

But her radicalism began in Russia. I was there myself at about that time, and saw the cruel mess that western economists were making of the place. I met a distinguished paediatrician, working all hours in a crumbling children's hospital, who on Saturdays cleaned the flat of an American businessman to get some dollars to feed her family. I thought then: everyone is standing around the Russian bear, watching it bleed to death, and suddenly comes a stentorian voice from the back of the crowd: 'Let me through, I'm a management consultant.'

The mission of Hertz's team, she writes in IOU, was 'to turn Russia into a market economy or, more precisely, into a new United States of America'.

But 'the country's traditions, culture and history could not just be razed overnight - the "one size fits all" solution that we were trying to impose was not going to fit'.

IOU is about the human consequences of what governments and companies have done to the third world since the second world war. 'Children in Africa,' writes Hertz, 'die every single day because their governments are spending more on debt servicing than they do on health or education.' The money was lent by western banks and governments to corrupt regimes for schemes that would never benefit the people of those countries; and now those people must pay.

Hertz reminds us of the 1980s rush to lend money to Saddam Hussein. Britain, the US, Germany, France, Russia and Saudi Arabia pitched in for loans amounting to about $100 billion, and Hussein spent it on buying weapons from us. Last year, those weapons were trained on our soldiers. Loans were pouring in right up to the eve of the 1991 Gulf War: the cynicism is breathtaking and Hertz offers many other examples of injustice and avarice.

If the book simply raged against injustice, it might be dismissed as just another rant. But it also offers a practical final chapter, which recognises that exiting the morass is not as simple as cancelling all third-world debt. There are some debts that should never have to be repaid, and others that are illegitimate or unpayable. The difficulty is working out which they are.

Hertz has a stab at it. A debt is illegitimate, she suggests, if three conditions are met: the regime that borrowed the money lacked democratic consent; the money was used in ways that were inimical to the interests of the population; and the lender knew the money would be used in such a way.

Even if these conditions are not met, she says, debts should surely be cancelled 'if, as a consequence of having to pay its debts, a country is unable to guarantee its citizens subsistence levels of food, water, clothing and shelter and basic healthcare and education; if, in order to service its debts, it is forced to destroy and degrade the environment; or if, by merit of its massive debt burden, it is deemed ineligible for much-needed aid'.

We are not insulated from the results of third-world exploitation. Poverty, largely the result of debt, is the principal breeding ground for global terrorism. If compassion or shame do not compel us to cancel third-world debt, self-interest ought to do so. Hertz's two contributions are a compelling business case for doing something and a practical proposal for how to do it.

IOU: The Debt Threat and Why We Must Defuse It

Noreena Hertz

Fourth Estate

£16.99

MT price £13.99

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- Francis Beckett's The Blairs and Their Court is published by Aurum this month.